WHERE DID INDIA'S SKILLED LABOR COME FROM?

July 10, 2006

Most commentators credit India's technical prowess to socialist rulers who, in a bid to make the country an industrial power, "overinvested" in engineering and other professional colleges. Even as secondary school education languished, they built a slew of super-elite engineering colleges called IITs (Indian Institutes of Technology) and a network of regional engineering colleges to train workers for state-owned heavy industry companies.

But the government's "overinvestment" in education was not nearly enough to meet the massive demand among India's middle classes for professional degrees says Shikha Dalmia, senior analyst at the Reason Foundation.

Consider:

In the 1960s and 1970s, religious and philanthropic organizations picked up the slack by founding private engineering colleges of their own, often of substandard quality.

But as the information technology (IT) industry grew in the 1990s, so did the number of private engineering colleges and polytechnics. Today, four out of five engineering students attend private colleges, even though those institutions charge five to 10 times more in tuition than government colleges.

The private schools also demand an upfront entry or "capitation" fee equivalent to about $3,000 to $4,000.

The government's role in providing higher education has shrunk over the years because it simply did not have the money to keep subsidizing it. But this is a blessing in disguise, argues C.K. Prahlad, a professor of management at the University of Michigan.

The strong presence of private-sector technical schools gives IT companies a far better chance of addressing the worker shortage than of addressing the shortage of roads, power supply and other public-sector infrastructure.

Furthermore, unlike government colleges, the private schools have a vested interest in delivering graduates with skills suited for the industry. Otherwise, Prahlad notes, they can't justify their hefty capitation fees.